Resolute Reports Preliminary First Quarter 2014 Results

MONTREAL, May 1, 2014 /CNW Telbec/ - Resolute Forest Products Inc.
(NYSE: RFP) (TSX: RFP) today reported a net loss for the quarter ended
March 31, 2014, excluding special items, of $26 million, or $0.27per share, down from net income, excluding special items, of $28
million, or $0.30 per share, in the first quarter of 2013. GAAP net
loss was $50 million, or $0.53 per share, compared to $5 million, or
$0.05 per share, in the first quarter of 2013. Sales were $1.0 billion
in the quarter, down by $58 million from the first quarter of 2013.

"Operating costs ordinarily peak in winter, but this year has been
extremely cold, and its effects weighed heavily on our quarterly
results," said Richard Garneau, president and chief executive
officer. "The abnormally cold winter caused a material increase in
energy costs, production disruptions, equipment failures and
distribution constraints. Though some of these effects will carry into
the second quarter, we're focused on moving beyond this disappointing
quarter, committed to maximize our competitive advantage in this
challenging industry and improve our earnings power."

Non-GAAP financial measures, such as adjustments for special items and
adjusted EBITDA, are reconciled below.

Consolidated Quarterly Operating Income Variance Against Year-Ago Period
The Company recorded an operating loss of $33 million in the first
quarter, compared to $49 million in the year-ago period. The seasonal
effect of winter was significantly more severe in 2014, adversely
affecting operating income by $55 million, and outweighing the
favorable effect of the weaker Canadian dollar ($32 million). The
effects of the abnormally cold winter included:

higher steam costs because of higher fuel energy pricing throughout most
of the network and an increase in usage, particularly at the U.S.
southeast mills, which are not designed for sustained freezing
conditions;

high electricity costs at the Ontario mills because of volatility and
sharp increases in that province's market-based power rates;

approximately 30,000 metric tons of lost production due to natural gas
curtailments, electricity costs or other process limitations and
distribution constraints for lack of carrier availability; and

additional costs of freight, fiber in the U.S., labor, chemicals and
maintenance.

The Company also experienced a greater than expected level of
operational disruptions in the quarter, including mechanical failures
in Catawba, the failure of the bleaching tower and a turbine valve at
Saint-Félicien, and a failure in a machine's vacuum blower at Augusta.
Operational disruptions accounted for approximately 25,000 metric tons
of lost production in the quarter, and $7 million of additional costs.

Overall pricing was lower this quarter ($15 million) because of lower
average transaction prices in newsprint, specialty papers and wood
products, more than offsetting the 8% increase in market pulp
prices. In a segment facing secular decline, newsprint shipments were
3% higher, despite the effects of the abnormal weather and operational
disruptions. Wood products shipments also rose by 4%. But shipments
fell by 7% in specialty papers due to the abnormal weather and
operational disruptions, and by 10% in market pulp for the same
reasons, plus an increase in inventory as a result of timing and
distribution constraints for lack of carrier
availability. Manufacturing costs increased largely because of the
effect of the abnormal winter and the operational disruptions, but also
because of higher stumpage fees and other costs associated with the
comprehensive modification of the forest tenure system in the province
of Québec. These increases were only partly offset by the absence of
start-up costs, lower pension and other postretirement benefit
expenses, the addition of electricity cogeneration production at
Thunder Bay and Gatineau, and lower labor costs from restructuring
initiatives. Selling, general and administrative expenses were $8
million lower in the quarter. Because of the timing of asset
optimization and mill restructuring initiatives, closure costs,
impairment and other related charges were $30 million lower in the
first quarter of 2014.

Segment Operating Income Variance Against Prior Quarter

Newsprint
Newsprint generated an operating loss of $15 million in the first
quarter, compared to $19 million of operating income in the fourth
quarter of 2013. The weaker Canadian dollar as well as mix and price
deterioration in certain export markets caused the average transaction
price to slip by 2%. Shipments were 6% lower compared to the fourth
quarter, largely as a result of weather-related production disruptions,
a mechanical failure at the Augusta mill and shipment timing. Despite
the favorable effect of the weaker Canadian dollar, operating cost per
unit (the "delivered cost") rose by 8%, to $623 per metric ton, mostly due to the severe winter,
particularly the cost of electricity at Ontario mills. Shipment timing
was the largest contributor to the 26,000 metric ton increase in
finished goods inventory.

Specialty Papers
Specialty papers generated an operating loss of $24 million in the
quarter, compared to operating income of $11 million in the previous
quarter. The average transaction price fell by 3%, led by sustained
pressure in coated mechanical grades and, to a lesser degree, in
supercalender grades. Overall shipments fell by 11%, reflecting
seasonality in catalogue and retail end-uses, grade substitution,
weather-related production disruptions and mechanical failures in
Catawba. Despite the favorable effects of the weaker Canadian dollar
and increased cogeneration production, the delivered cost rose by 8%,
to $774 per short ton, mostly as a result of the severe winter,
including a significant increase in steam costs, particularly at our
U.S. southeast mills, and also additional costs following the
mechanical failures at Catawba.

Market Pulp
Operating income was $8 million in the first quarter, compared to $16
million in the previous quarter. The average transaction price rose
across all grades, by 3% overall, but shipments fell by 20%. In
addition to the 23% increase in finished goods inventory, largely
because of weather-related distribution constraints, vessel timing and
one mill's pre-outage inventory build, the drop in shipments reflects
an increase in internal consumption of hardwood kraft pulp, operational
disruptions at Saint-Félicien and weather-related production
disruptions. These factors also pushed the delivered cost up by 5%, to
$674 per metric ton, despite a drop in general maintenance costs.

Wood Products
Compared to the fourth quarter, operating income in the wood products
segment rose by $3 million, to $12 million. The average transaction
price rose by 2% but shipments dropped by 7% and inventory rose
significantly, mostly due to softer demand as a result of the abnormal
winter and distribution constraints for lack of carrier
availability. The delivered cost fell by 2%, reflecting the weaker
Canadian dollar and the retroactive reversal of certain export duties,
despite an increase in log costs.

Outlook
Mr. Garneau added: "The costs of natural gas and Ontario power
normalized through April, but distribution constraints will likely
continue through the second quarter, which will weigh on shipments as
well as freight and warehousing costs. Despite that, we expect to
reduce inventory and increase shipment volumes across all segments.
Recent industry conversion announcements suggest higher newsprint
operating rates toward the later part of the year. The coated papers
portion of our specialty papers segment is expected to remain under
pressure as a result of lower demand. Market prices for lumber have
been trending down until recently due to the cautious recovery in U.S.
housing starts."

Earnings Conference Call
The Company will hold a conference call to discuss the financial results
at 9:00 a.m. (ET) today. The public is invited to join the call at
(888) 789-9572 (pass code 7888901) at least fifteen minutes before its
scheduled start time. A simultaneous webcast will also be available
using the link provided under "Presentations and Webcasts" in the
"Investors" section of www.resolutefp.com. A replay of the webcast will be archived on the Company's website. A
phone replay will also be available until May 15 by dialing (800)
408-3053 with the pass code 6365728.

Description of Special Items

Special items, net of tax

First quarter

First quarter

(in millions)

2014

2013

Foreign currency translation loss

$

16

$

7

Closure costs, impairment and other related charges

8

25

Inventory write-downs related to closures

1

2

Start-up costs of idled mill

-

11

Transaction costs

-

3

Other income, net

(1)

(15)

Total

$

24

$

33

Cautionary Statements Regarding Forward-Looking Information
Statements in this press release and the earnings conference call
referred to above that are not reported financial results or other
historical information of Resolute Forest Products Inc. are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. They include, for example,
statements relating to our: efforts to continue to reduce costs and
increase revenues and profitability, including our cost-reduction
initiatives; business and operating outlook, including the impact of
weather; assessment of market conditions; prospects, growth strategies
and the industry in which we operate; and strategies for achieving our
goals generally. Forward-looking statements may be identified by the
use of forward-looking terminology such as the words "should," "would,"
"could," "will," "may," "expect," "believe," "anticipate," "attempt,"
"project" and other terms with similar meaning indicating possible
future events or potential impact on our business or Resolute's
shareholders.

The reader is cautioned not to place undue reliance on these
forward-looking statements, which are not guarantees of future
performance. These statements are based on management's current
assumptions, beliefs and expectations, all of which involve a number of
business risks and uncertainties that could cause actual results to
differ materially. The potential risks and uncertainties that could
cause Resolute's actual future financial condition, results of
operations and performance to differ materially from those expressed or
implied in the presentation referred to above include, but are not
limited to, the potential risks and uncertainties set forth under the
heading "Risk Factors" in Part 1, Item 1A of Resolute's annual report
on Form 10-K for the year ended December 31, 2013.

All forward-looking statements in the presentation referred to above are
expressly qualified by the cautionary statements contained or referred
to above and in Resolute's other filings with the SEC and the Canadian
securities regulatory authorities. Resolute disclaims any obligation to
publicly update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by law.

About Resolute Forest Products
Resolute Forest Products is a global leader in the forest products
industry with a diverse range of products, including newsprint,
specialty papers, market pulp and wood products. The Company owns or
operates over 40 pulp and paper mills and wood products facilities in
the United States, Canada and South Korea, and power generation assets
in Canada. Marketing its products in close to 90 countries, Resolute
has third-party certified 100% of its managed woodlands to at least one
of three internationally recognized sustainable forest management
standards. The shares of Resolute Forest Products trade under the stock
symbol RFP on both the New York Stock Exchange and the Toronto Stock
Exchange.

Resolute and other member companies of the Forest Products Association
of Canada, as well as a number of environmental organizations, are
partners in the Canadian Boreal Forest Agreement. The group works to
identify solutions to conservation issues that meet the goal of
balancing equally the three pillars of sustainability linked to human
activities: environmental, social and economic.

Adjustments to reconcile net loss including noncontrolling interests to
net cash used in operating activities:

Share-based compensation

-

2

Depreciation and amortization

62

60

Closure costs, impairment and other related charges

4

37

Inventory write-downs related to closures

1

4

Deferred income taxes

(8)

(40)

Net pension contributions and other postretirement benefit payments

(34)

(16)

Loss on translation of foreign currency denominated deferred income
taxes

48

35

Gain on translation of foreign currency denominated pension and other
postretirement benefit obligations

(37)

(35)

Gain on forgiveness of note payable

-

(12)

Net planned major maintenance payments

-

(1)

Other, net

5

(4)

Changes in working capital:

Accounts receivable

29

(9)

Inventories

(64)

(43)

Other current assets

(5)

(11)

Accounts payable and accrued liabilities

8

18

Net change in working capital

(32)

(45)

Net cash used in operating activities

(41)

(20)

Cash flows from investing activities:

Cash invested in fixed assets

(36)

(40)

Disposition of other assets

-

2

Decrease in restricted cash

1

2

Decrease in deposit requirements for letters of credit, net

1

1

Net cash used in investing activities

(34)

(35)

Cash flows from financing activities:

Payments of debt

(1)

(1)

Contribution of capital from noncontrolling interest

-

8

Net cash (used in) provided by financing activities

(1)

7

Effect of exchange rate changes on cash and cash equivalents

(6)

-

Net decrease in cash and cash equivalents

(82)

(48)

Cash and cash equivalents:

Beginning of period

322

263

End of period

$

240

$

215

RESOLUTE FOREST PRODUCTS INC.STATEMENTS OF OPERATING INCOME AND NET INCOME ADJUSTED FOR SPECIAL ITEMS

A reconciliation of our operating income, net income and net income per
share reported before special items
is presented in the tables below. See Note 5 to the Unaudited
Consolidated Financial Statement Information
regarding our use of non-GAAP measures.

Three Months Ended March 31, 2014 (unaudited, in millions except per share amounts)

Operatingincome (loss)

Net income (loss)

EPS

GAAP as reported

$

(33)

$

(50)

$

(0.53)

Adjustments for special items:

Foreign currency translation loss

-

16

0.17

Closure costs, impairment and other related charges

10

8

0.09

Inventory write-downs related to closures

1

1

0.01

Other income, net

-

(1)

(0.01)

GAAP as adjusted for special items

$

(22)

$

(26)

$

(0.27)

Three Months Ended March 31, 2013(unaudited, in millions except per share amounts)

A reconciliation of our net income including noncontrolling interests to
EBITDA and Adjusted EBITDA is presented in the tables below.
See Note 5 to the Unaudited Consolidated Financial Statement Information
regarding our use of non-GAAP measures EBITDA and Adjusted EBITDA

1. Closure costs, impairment and other related charges for the three
months ended March 31, 2014 and 2013 were comprised of the following:

(Unaudited, in millions)

Impairmentof Assets

AcceleratedDepreciation

Pension PlanSettlementGain

Severanceand OtherCosts

Total

Extended market-related outage:

Paper machine in Fort Frances, Ontario

$ -

$ -

$ -

$ 6

$ 6

Permanent closure:

Paper machine in Iroquois Falls, Ontario

-

3

-

-

3

Other

1

-

-

-

1

2014 Total

$ 1

$ 3

$ -

$ 6

$ 10

2013 Total

$ -

$ 35

$ (1)

$ 6

$ 40

2. Other (expense) income, net for the three months ended March 31, 2014
and 2013 was comprised of the following:

(Unaudited, in millions)

2014

2013

Foreign exchange loss

$

(14)

$

(5)

Gain on forgiveness of note payable

-

12

Gain on liquidation settlement

-

9

Miscellaneous income

1

2

$

(13)

$

18

3. During the three months ended March 31, 2014, we recorded an income
tax benefit of $8 million. When compared to an expected income tax
benefit of $20 million based on the U.S. federal statutory income tax
rate of 35%, our income tax benefit recorded reflects a net increase in
valuation allowances, as well as foreign exchange related items.

4. For the calculation of basic and diluted net loss per share for the
three months ended March 31, 2014 and 2013, no adjustments to net loss
attributable to Resolute Forest Products Inc. were necessary.

5. Tables represent a reconciliation of certain financial statement line
items reported under generally accepted accounting principles ("GAAP")
to our use of non-GAAP measures of operating income (loss), net income
(loss) and net income (loss) per share ("EPS"), in each case adjusted
for special items, as well as EBITDA and adjusted EBITDA, in each case
by reportable segment. We believe that these measures are useful
because they allow the reader to more easily compare our ongoing
operations, financial performance, and EPS from period to period. They
are also consistent with the indicators management uses internally to
measure our performance. These non-GAAP measures should be considered
in addition to and not a substitute for measures of financial
performance calculated and presented in accordance with GAAP in our
Consolidated Statement of Operations in our filings with the Securities
and Exchange Commission. Consequently, readers should rely on GAAP
operating income (loss), operating income (loss) by reportable segment,
net income (loss) and EPS. Non-GAAP measures included in our press
release include:

Operating income (loss) adjusted for special items - is defined as
operating income (loss) from our Consolidated Statements of Operations
excluding special items, such as closure costs, impairment and other
related charges, inventory write-downs related to closures, start up
costs of idled mills, gains and losses on disposition of assets,
transaction costs and other charges or credits that are excluded from
our segment's performance from GAAP operating income (loss).

Net income (loss) adjusted for special items - is defined as net income
(loss) from our Consolidated Statements of Operations excluding the
same items as under operating income (loss) adjusted for the special
items, in addition to the effects of foreign currency translation, net
loss on extinguishment of debt, other income (expense) and U.S.
deferred income tax asset valuation allowance.

EPS adjusted for special items - is defined as diluted EPS calculated
based on the net income (loss) adjusted for special items as described
above.

EBITDA by reportable segment - is defined as net income (loss) including
noncontrolling interests from our Consolidated Statements of
Operations, allocated to each of our reportable segments (newsprint,
specialty papers, market pulp and wood products) in accordance with
FASB ASC 290, "Segment Reporting," and adjusted for depreciation and
amortization. EBITDA for the corporate and other segment is defined as
net income (loss) including noncontrolling interests from our
Consolidated Statements of Operations after the allocation to
reportable segments, adjusted for interest expense, income taxes and
depreciation and amortization.

Adjusted EBITDA - is defined as EBITDA excluding the special items
described above.